I need to check my work. Thanks for your help!

I need to check my work. Thanks for your help!

Situation #1:

Georgia Peaches LLC grows peach trees and harvests peaches. They can sell off the peaches by the pound after harvest, or they can further process the peaches into jam, cider, or salsa. Because of economies of scale, they have found that they would do the entire harvest as one of the four options (whole, jam, cider, or salsa); they do not have nor are able to invest in the equipment and resources needed to perform a combination of goods at this time. The data related to a typical harvest is as follows:

All costs associated with growing the peaches		$ 1,047,000
Picking and cleaning the peaches		$ 345,000
Sales value of intermediate products at split-off point:		$ 1,675,000
Costs of further processing intermediate products:
Jam		$ 157,150
Cider		$ 120,000
Salsa		$ 258,000
Sales value of end products:
Jam		$ 1,843,000
Cider		$ 1,795,000
Salsa		$ 1,947,000

Instructions:

1. Make a recommendation to the Controller: should Georgia Peaches LLC sell the peaches whole or process further into jam, cider, or salsa? Why?Support your answer with a computation or illustration to support that recommendation. Given the information available to you, how much profit (or loss) will the company make if your recommendation is accepted?

Supporting Computation:Analysis of Buy or Process Further

Note:Company can only do one of the four (sell whole or process further into jam, cider, or salsa)

Situation #2:

Umbee is a manufacturer of umbrellas. They manufacture many different models, ranging from the small umbrellas to large umbrellas in a variety of colors. Umbee has many capabilities and typically makes most components themselves; however, they have recently received an offer from Leonard Handy Company (LHC) to make and sell 5,000 handles to Umbee at $3.50 per unit. As the accounting intern, the Controller has asked you to evaluate this offer and make a recommendation as to whether or not the company should continue to make their own handles or buy them from LHC.

You have investigated the costs and have learned the following based on a typical production run of 5,000 units:

		Per Unit	5,000 Units
Direct Materials		$ 1.37	$ 6,850
Direct Labor		$ 0.82	$ 4,100
Variable Overhead		$ 0.63	$ 3,150
Supervisor's Salary		$ 0.42	$ 2,100
Depreciation of Special Equipment		$ 0.37	$ 1,850
Allocated General Overhead		$ 0.72	$ 3,600
Total Cost		$ 4.33	$ 21,650

Additional information:

a. Umbee has all of the required equipment to produce all parts of the umbrella and will continue to incur depreciation costs.

b. General Overhead expenses are allocated to different areas of production by manufacturing space. The square footage associated with handle manufacturing will remain on the books whether or not production occurs.

c. If the purchase is made, the supervisor's role will be eliminated.

Instructions:

1. Make a recommendation to the Controller: should Umbee continue tomakeseats internally or should theybuyseats from LHC? Why?Support your answer with a computation or illustration to support that recommendation. What is the net impact on the company?

Situation #3:

BigPharma LLC, a large pharmaceutical company, would like to make a special order purchase of 250 units of your DK3 umbrella, which normally has a retail price of $12.99 each.They have requested these units at a price of $9.99. In addition, they have requested their logo on the units to be given away at an upcoming convention in Seattle. Each logo will cost an additional $1.02 per unit. You have extra capacity available, and the order would have no effect on the company's regular sales. The company's Controller has once again looked to you to make a recommendation.

You have pulled the cost card on this particular item and have found the following unit costs:

		Per Unit
Direct Materials		$ 5.48
Direct Labor		$ 2.28
Manufacturing Overhead*		$ 3.20
Total Cost Per Unit		$ 10.96
* Note: The variable portion of the manufacturing overhead is $1.42; the remainder is fixed.

Instructions:

1. Make a recommendation to the Controller: should Umbeeacceptthe special order orrespectfully declinethe order? Why? Support your answer with a computation or illustration to support that recommendation.What is the net impact on the company?

Situation #4:

Julianne's of Appletown operates a high-end boutique in Appletown. The merchandise they sell are in three different product lines: Clothing, Shoes, and Purses/Handbags. During a recent fiscal year, Purses/Handbags has not been performing well. The owners are considering dropping this product line, although some of their key customers have stated that they appreciate the store carrying these items, resulting in the ability to match purses to outfits. Although you (a hired consultant) feel that this customer feedback is critical, the shop's owners, Julianne and her husband, Fred, only want to look at hard numbers. Julianne and Fred have asked you to analyze relevant costs and to make a recommendation for retaining or dropping this product line based on the numbers.

As a starting point, you developed the following contribution margin income statement for the past quarter:

Julianne's of Appletown
Contribution Margin Income Statement
For the Quarter Ending December 31, 20##
			Product Line
		TOTAL	Clothing	Shoes	Purses/Handbags
Sales		$347,250	$159,735	$ 121,538	$65,978
Variable Expenses		$158,172	$63,894	$54,692	$39,587
Contribution Margin		$ 189,078	$95,841	$66,846	$26,391
Fixed Expenses:
Rent	relevant or irrelevant?	$60,000	$40,000	$10,000	$10,000
Salaries	relevant or irrelevant?	$58,275	$19,425	$19,425	$19,425
Advertising	relevant or irrelevant?	$24,092	$11,082	$8,432	$4,577
Utilities	relevant or irrelevant?	$8,475	$3,899	$2,966	$1,610
Depreciation--Fixtures	relevant or irrelevant?	$4,100	$1,886	$1,435	$779
Depreciation--Point of Sale System	relevant or irrelevant?	$875	$403	$306	$166
Insurance	relevant or irrelevant?	$4,000	$1,840	$ 1,400	$760
General Administrative	relevant or irrelevant?	$9,482	$4,362	$3,319	$1,802
Total Fixed Expenses		$169,299	$82,896	$47,283	$39,120
Net Operating Income (Loss)		$19,779	$12,945	$19,562	$(12,729)

Instructions:

Specify whether each fixed expense is relevant (avoidable) or irrelevant (unavoidable) by typing the correct response in the shaded cell next to that cell. And then determine whether or not the company should retain or drop the Purses/Handbags product line, and why.

Finally, make a recommendation to Julieanne and Fred regarding Purses/Handbags: should the product line be retained or dropped, and why? And support your answer with an illustration, like a contribution margin analysis or a new contribution margin income statement, that demonstrates the impact of dropping the product line.